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New Delhi, Jan 2
Infrastructure finance companies (IFCs) focussed on the power sector are expected to disburse loans worth Rs 2.9 lakh crore in the current fiscal year, with 14 per cent of the total loan portfolio going to the renewable energy (RE) sector, ratings agency CareEdge said.
The state-run PFC and REC are two of India’s biggest lenders to the power sector. Power-focussed IFCs contributed 64 per cent of the total loan book of NBFC-IFCs (non-banking financial company) and IDFs (infrastructure debt funds), as on March 31, 2023.
“Considering the rising power demand and sizable fund requirement, the growth trend has continued, with these IFCs expected to disburse close to Rs 2.9 lakh crore in FY24,” CareEdge said in a report.
Growth would come from both traditional generation and distribution portfolios led by the Revamped Distribution Sector Scheme (RDSS) and disbursements towards the renewable segment, it added.
Share of IFCs growing
The share of power-focussed IFCs’ exposure to the sector vis-a-vis banks’ exposure has gradually increased from 55 per cent as on March 31, 2020, to 59 per cent as on March 31, 2023, and is expected to further increase to 63 per cent by March 31, 2024, the ratings agency said.
While these IFCs grew at an average CAGR of 12 per cent from FY19-FY21, Covid-19 led to a decline in their capital expenditure plans and the subsequent delay in the release of disbursements resulted in growth moderating to 2 per cent Y-o-Y in FY22, which was accentuated by lower sanctions and relatively high pre-payments.
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Growth, however, again picked up in FY23, with their loan portfolio growing by 14 per cent Y-o-Y, led by increased funding to DISCOMs and renewables.
Power demand
A surge in economic activity post Covid has seen power demand ride rapidly over the past two years. In FY23, power consumption increased by a healthy 9 per cent Y-o-Y to around 1500 billion units (BUs).
The demand trend is expected to continue, with the average energy requirement in the country estimated to grow 7 per cent Y-o-Y in FY24. Overall, over the next few years, power demand is expected to grow to around 1,908 BU by FY27, at an average CAGR of 7 per cent from FY22-FY27.
This will require a total capacity addition of around 212 gigawatts (GW) during FY22-FY27, against the installed capacity of about 426 GW as of November 30, 2023.
Renewable energy
CareEdge said with the government’s growing emphasis on the renewable energy sector, the share of renewables in loan portfolios has also increased.
It rose from 10 per cent as of March 31, 2022, to 12 per cent by March 31, 2023. Despite this growth, the renewable sector’s representation in these portfolios has historically been modest.
“However, the share of renewable energy in the overall electricity generation mix will gradually increase to 14 per cent by FY24, and further to 21 per cent by FY25. This increase is expected to be driven primarily by growth in the solar sector, followed by wind energy,” it added.
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